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CONCRECES: A sombrero business that supports its people

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Moisés Genaro Sánchez

July 08 2016

In the Mexican state of Oaxaca, almost half the population works in the primary sector, with limited access to banks or financial institutions. Many small entrepreneurs struggle to obtain finance for their businesses. This is where Oikocredit partner, Unión de Crédito Concreces SA de CV (known as CONCRECES) plays a valuable role. CONCRECES is a well-established credit union supporting micro and small enterprises in Oaxaca and, to a smaller extent, in other states.

Financing small businesses

CONCRECES provides loans to entrepreneurs who want to get their business off the ground, such as Oaxaca-based Moises Genaro Sanchez, who owns a hat factory trading under the business name Sombreros Sanchez. Moises buys hats from thousands of producers who use 14 different kinds of straw to make the hats by hand. Many of the producers predominately work in primary sectors such as farming, with the weaving earning them a side income. Most producers weave five to six sombreros a day.

Hats as currency

Sombreros Sanchez has a logistic system which is ingenious and cheap. When each producer has finished 20 to 30 hats, they are able to sell them to the village store or trade them for food. The store owners then use the hats either as currency to pay their suppliers or to sell them for profit. The suppliers then deliver the hats to Moises’ factory in Oaxaca where over 20 employees process the hats.

At the factory the sombreros are put into a moulding machine and then the excess leaves are cut. To finish, a string or ribbon is tied around them. Last year around 20,000 ribbons were printed in the factory and sewn onto hats for Guelaguetza, the most important annual festival in Oaxaca. Moises sells the hats for US $0.80 a piece, with the producers receiving approximately US $0.40 a hat. Sombreros Sanchez doesn't earn its profits from big margins, rather from a large turnover: 7,000 to 8,000 hats a month.

Surviving a crisis

Moises’ grandfather started the company in the 1940s, with one sewing machine and one moulding machine that could create three models. In the 1960s Moises’ father expanded the production, sending salesmen with truckloads of hats into the country to sell them outside Oaxaca. That worked rather well, until the 1990s. When the Mexican pesos crisis hit in 1994, the sale of sombreros collapsed.

Much needed capital for Sombreros Sanchez

Without CONCRECES, Sombreros Sanchez would have been back to square one. Moises explains: “We might not have gone bankrupt, but we would have been a tiny company again.” With working capital from CONCRECES, Sombreros Sanchez was able to withstand difficult times, paying for the stock upfront to keep the production at a consistent level. Thanks to this, sales have been expanded internationally to France, Argentina, Costa Rica, Honduras, El Salvador, Canada and the US.

Helping people

Sombreros Sanchez has grown to be the second largest producer of straw hats in Mexico. By selling their hats for US $0.80, Sombreros Sanchez is able to remain competitive, while still paying the producers a fair price. Through Sombreros Sanchez, Moises is able to continue pursuing his goal of helping people in a sustainable way.

Read more about CONCRECES

Read an interview with Oikocredit’s country manager for Mexico

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